Context
In April 2020, the FCA set out its expectations to help solo-regulated firms to apply the SM&CR under the exceptional circumstances brought about by the coronavirus pandemic (Covid-19). These expectations offered some flexibility in the application of the SM&CR rules to firms impacted by coronavirus. However, as firms have, in the FCA’s view, now adapted to the constraints of the pandemic the Regulator considers there is no longer a need for this flexibility to continue. The FCA has therefore issued an update which sets out its revised expectations; some of the previously available provisions ended on 7 January 2021 and the relevant modifications by consent will end on 30 April 2021.
Key points to note
- As a reminder, the FCA has re-iterated that firms are not required to have a single Senior Manager responsible for their response to coronavirus. Firms should allocate responsibilities in a way which allows them to best manage the risks faced.
- From 7 January 2021, firms are expected to apply notification requirements and submit a Form J when significant changes are made to statements of responsibilities (SORs)
- This is a change to the FCA’s previous position which was that a firm would not need to notify the FCA if a temporary change was required to a statement of responsibility as a result of the pandemic
- There is no need to submit updated SORs in relation to changes made prior to 7 January 2021 however, there is an expectation of clear internal documentation to be available to the FCA should this be requested
- The modification by consent to the 12-week rule previously issued by the FCA is still available, however a firm cannot consent to the modification after 30 April 2021 with all modifications consented to before that date coming to an end on 30 April 2021
- The modification meant that firms could notify the FCA that they consented to an extension of the 12-week rule where temporary arrangements in respect of a Senior Manager, made as a result of the pandemic, lasted longer than 12 weeks
- This change means that the modification will not assist with a temporary appointment that begins after 5 February 2021
- There is an expectation that consent to the modification be clearly documented, including on relevant SORs
- Firms can allocate the responsibilities of a Senior Manager to the person who is standing in for the Senior Manager. Such allocation is usually to the most senior person responsible for the area or activity, who has sufficient authority and an appropriate level of knowledge and competence
- If a firm is subject to the Overall Responsibility rule in SYSC 26 (enhanced scope firms only) the responsibilities of a Senior Manager who has been furloughed must be allocated to another Senior Manager, unless relying upon the 12-week rule
- Individuals performing required functions (Compliance Oversight, MLRO and Limited Scope Function) must only be furloughed as a last resort
- Unless a furloughed Senior Manager is permanently leaving their post, they will retain their approval and will not need to be re-approved by the FCA, however, the firm is still responsible for ensuring the Senior Manager is fit and proper